Patient Financing of Healthcare (The Patient Pays)
What’s the Issue?
Canadians would like an efficient healthcare system. Is this more likely if patients pay for services?
- co-payments where the patient pays a set amount, with the insurer covering the remainder of the cost
- deductibles where the patient pays the full cost up to a set amount, at which point the insurance kicks in
Most insurance plans use both.
Another variation eliminates the idea of insurance. Medical savings accounts (MSAs) are essentially savings plans where tax-deferred funds are set aside. Patients can then use these funds to pay for medical expenses they incur. MSAs typically have rules on what qualifies as medical expense (e.g. Can you include your gym membership? How about a massage?).
In yet another variation, MSAs may be coupled with catastrophic insurance coverage. In this model, the patient will pay the first bills, but once the threshold has been exceeded, insurance may take over. These plans vary considerably in terms of where the threshold is set, and the levels of copayments and deductibles.
User fees are often presented as a way of curbing healthcare costs by:
- Preventing people from overusing the system.
- Bringing in revenue.
However, research to date suggests two good reasons why patient financed healthcare doesn’t make sense
First, user fees discourage patients from seeking both necessary and unnecessary care. Faced with user-fees, people often under-use the system by avoiding preventative care and effective drug prescriptions. User fees in effect leave us with the burden of deciding whether or not symptoms warrant medical attention. For example, when a child has a fever, most parents don’t know whether it’s the flu or the onset of meningitis. Parents may make the decision about whether to seek healthcare on the basis of whether the user fees will leave enough money to pay the rent, without realizing the potential medical complications.
Which leads to the second finding…
Healthcare financed by patients does not save money. While user fees sometimes discourage sick people from filling hospital beds or booking doctors appointments, this unused capacity does not save the system much money. Research shows that these freed up resources are not closed down. Instead, they end up being filled by people who can more easily afford the user fees, for care they may not need. That is, user fees may—ironically—encourage unnecessary or marginally useful care in order to make sure the physicians and hospital beds available stay busy.